Biden Set To Sign Executive Order To Address Chip Shortages, Supply-Chain Crisis: WSJ

  • President Joe Biden is close to signing an executive order reviewing supply chains for critical materials, including semiconductors to pharmaceuticals and rare-earth minerals, the Wall Street Journal reports.
  • The global semiconductor chip crisis has compelled U.S. automakers, including Ford Motor Co (NYSE: F) and General Motors Co (NYSE: GM) and other manufacturers, to opt for production holidays.
  • Recently a group of U.S. chip companies, including Intel Corp (NASDAQ: INTC), Qualcomm Inc (NASDAQ: QCOM), Micron Technology Inc (NASDAQ: MU), and Advanced Micro Devices Inc (NASDAQ: AMD), sought Biden’s assistance to solve the crisis.
  • Biden is slated to meet with a bilateral group of House and Senate lawmakers to discuss the pandemic-induced supply-chain issues.
  • The executive order is estimated to seek a 100-day supply chain review in four areas, including semiconductors used in products from cars to phones, large-capacity batteries for electric vehicles, pharmaceuticals, and vital rare-earth elements for technology and defense.
  • Interestingly, China rules the rare-earths market and is a major player in multiple supply areas, including pharmaceuticals. The order is timed when the U.S. intends to forge ties with different supplier countries and shun relations with China.
  • Major U.S. semiconductor companies have outsourced their chip production to Taiwan Semiconductor Manufacturing (NYSE: TSM) and Samsung Electronics Co Ltd (OTC: SSNLF). Samsung has been assured federal incentives in return for a factory in New York. TSM recently disclosed plans for a $12 billion chip plant in Arizona to come online by 2024.
  • The order is estimated to seek a one-year review of supply chains encompassing six sectors, from technology to food production.
  • The order will be focused on domestic production with incentives including job-training programs and business loans, including the federal procurement process for more American-made purchases. It will also include certain import limitations.
  • The Defense Production Act, covering vaccine production, could also be a part of the order. The government is expected to focus on public-private partnerships while improving relations with allies to address common supply vulnerabilities, including semiconductors.
  • The executive order will be linked to Biden’s plans towards U.S. job creation, mainly in the manufacturing sector that has faced intense foreign competition.
  • The long-term executive order is expected to incorporate the short-term chip crisis.
  • On Monday, Taiwan’s Economic Minister Wang Mei-Hua acknowledged receipt of a letter from the White House on the global shortage of auto chips and assured a resolution.
  • Image Courtesy: Wikimedia

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